How to Handle a Wage Garnishment While Awaiting Vendor Details in SAP Payroll Processing for the US

by Vinod Ray, Senior HCM Consultant, Capgemini US

July 13, 2015

In some states, vendor details may not be known or confirmed before the employer receives a notice of wage garnishment for an employee. This can happen because the garnishment notice comes from a court, or an attorney, or a credit collection agency rather than directly from the creditor. This can present problems because the garnishment deduction must start upon receipt of the creditor garnishment notice. Learn how to create a garnishment document to withhold garnishment funds from employee paychecks without confirmed creditor details, and how to pay the correct creditor after receiving the complete and confirmed details.

Learning Objectives

Configure the SAP remittance rule to hold deductions for an infinite period

Make relevant changes such as due date or creditor information to pay the correct creditor upon receipt of the correct vendor (creditor) details

Key Concept

Garnishment is a process of withholding funds from an individual’s earnings to repay debt obligations. These debts could be due to a court order, an IRS or other agency tax debt, or another debt-collection agency debt (e.g., banks seeking repayment of unpaid loans or a legal court trying to recover unpaid fees). SAP infotypes store garnishment details, such as infotype 0194 (Garnishment Document), infotype 0195 (Garnishment Order), and infotype 0216 (Garnish Adjustments). A remittance rule controls the vendor payment method and due date. Third-party posting is a vendor (payment due) posting to accounts payable (AP).

As garnishment is a process of withholding funds from an individual’s earnings to repay debt obligations, generally employers are required to withhold part of the employee’s earnings and pay the withheld amount directly to the creditor (vendor). The SAP Payroll system supports this garnishment process under payroll processing by creating a garnishment order detail in infotype 0194 and a document deduction in infotype 0195. If any adjustments are required, they can be made using infotype 0216. You can see a brief overview of the SAP Payroll system’s garnishment process in Figure 1.

Figure 1

The garnishment process flow in SAP Payroll

NoteIn the SAP system, the creditor is considered a vendor, so the terms
creditor and vendor are used interchangeably in this article.

In order to create a wage garnishment document, payroll first needs to know the creditor details. However, in some states (for example, Washington, Arizona, Nebraska, and New Mexico), the vendor details may not be known prior to or with the notice of garnishment. This is because, per these states’ regulations, individuals are given a grace period to respond to the court or reach a settlement. Therefore, there can be a gap wherein companies receive the notice of garnishment and the amount, but don’t know exactly who the creditor is. Generally, in such situations, the business might be able to figure out on its own the details for the vendor, but until the vendor details are confirmed, payment cannot be issued.

In the SAP system, the wage-garnishment processing steps are as follows:

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Vinod Ray

Vinod K. Ray has over 17 years of SAP experience focused on the HCM process, with specialization in U.S. Payroll. He is experienced in global roll-out, solution design, and deployment of HR business processes across various industries. For the past few years, Vinod has been involved in delivery of SuccessFactors/SAP ERP HCM core hybrid solutions. Vinod is a Senior HCM Consultant at Capgemini US.